In August of 2004 the governments of Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua and the Dominican Republic signed a free trade agreement
with the United States--CAFTA. The agreement must, however, still be passed by
the Congress of each country.
Once CAFTA is approved by each country, more than 80 percent of U.S.
exports of consumer and industrial products would be duty-free immediately. In
addition to tariff reductions, CAFTA expands market access across all sectors,
provides new protections for U.S. investors in the region, and has strong
provisions for trademarks, copyrights, and patents. CAFTA also includes
provisions addressing protection of the environment, worker rights, trade
capacity building and dispute settlement.
From the perspective of a United States based exporter, Central America
is a very important market because CAFTA countries comprise the 16th largest
market worldwide. In 2003, United States companies exported $10.9B dollars
worth of goods to the region.
From the perspective of a CAFTA based exporter, the United States is the
most important trading partner, with between 40 and 50 percent of all exports
going to the United States. Likewise, the United States provides the CAFTA
countries with some 50 percent of all imports. CAFTA seeks to solidify the
present relationships by strengthening "the special bonds of friendship and
cooperation among their nations and promot[ing] regional economic integration."
CAFTA seeks to promote a secure market for goods and services produced
in the respective territories, while still recognizing the differences in
their levels of development and economic size.
History of Trade
Trade between tribes, neighboring civilizations, and countries has been
a necessary part of every society since the beginning of time. In the ancient
world trade was typically in kind, with the parties bartering for the quantity
of one product they would exchange for another. Over time, as technology and
communications advanced this exchange went from in kind exchanges to the
exchange of some sort of currency—gold, shells, and finally paper currency.
The advances in technology in the past couple decades have allowed
businesses to purchase products from overseas through electronic means.